Monday, 11 April 2016

Why do projects nearly
always take longer than scheduled? You know the score - you've seen it many
times before: some large firm wins the tender to undertake mass refurbishment
on a large government building, or to build a new distributor road stretching several
miles, and inevitably the project overruns and the initial budget put aside
proves inadequate to the completion of the job.

But why does this happen
so frequently? The reason is quite straightforward; it is because the estimated
time is a predictable underestimation - a phenomenon that greatly increases
with the complexity of a job. And time is, of course, money.

Writing a blog post is
quite straightforward, so if I set myself 20 minutes to write it (or less with
short blogs like this one) it isn't difficult to stick to the deadline. But
projects like big building projects, even when an up-front fee has been agreed
and the incentive is to complete it as quickly as possible, are highly likely
to overrun - quite simply because our highly consistent underestimation of time
at each stage of a project is going to be multiplied with every further stages
of the process. It is the individual probabilities of stages multiplied that is
the key to the explanation.

This is what is commonly
known as the "planning fallacy" - whereby for every step in a
project, there is around a 50% chance of that stage being completed over the
estimation time. Once you plug in the numbers, that means that for a project of
two steps there's a 50% chance multiplied by a 50% chance, which means for two
steps the chance of overrunning is now 75%. For 3 steps it's 50% * 50% * 50%,
which means there is an 87.5% chance that out of a 3 step program it is going
to overrun. Consequently, then, a project in which each constituent step has
only a 50% chance of not overrunning, means that for every step the probability
increases by x 1/2, which means that projects with multiple steps are nigh-on
certain to overrun.

About Me

This is the Blog of James Knight - a keen philosophical commentator on many subjects.
My primary areas of interest are: philosophy, economics, politics, mathematics, physics, biology, chemistry, theology, psychology, history, the arts and social commentary.
I also contribute articles to the Adam Smith Institute and the Institute of Economics Affairs.
Hope you enjoy this blog! Always happy to hear from old friends and new!
Email:j.knight423@btinternet.com